With the highest sales of new cars in 2012, 19 millions, and exceptional growth year over year, China has positioned itself as the most attractive market for vehicle manufacturers. The Chinese government early determined their policies for the industry and today this is a cash cow with almost every joint-venture being government controlled as well as the importers and large dealer shops. However, fierce competition is the game by more domestic brands than you can name for a foreigner!
So, what are the driving factors for new technologies as Telematics, or “Connected Car” or “Smart Car” as the term evolves into. Traditional and long term investments or customer demand driven? Well, probably a mix of both and the success will depend on how you manage your way through the business rules in this ever changing and fast growing market.
The market is segmented by international brands, joint-ventures between international brands and Chinese investors and/or domestic brands, and then the large numbers of domestic brands. Each of them will require a separate strategy and somewhat different ways to manage. Is that possible for a foreign company and what does it mean?
For sure you need to be present and you need Chinese business competence not to mention the network, without this you should stay at home! Addressing the international brands, you will of course leverage your existing relationships from back home which will be the key into the China branch, however don’t forget that this market will most probably be their largest market and much power will already have shifted, thus make sure you have a balanced relationship and keep satisfying both ends. The JV’s and domestic brands will be different and here you need to know your way by Chinese culture and rules. JV’s are always Chinese dominant by ownership and mirrored organizations from both sides are set up, foreigners are acting more as advisers and the domestic sides are making the main decisions. Bottom line is that you treat the JV’s and domestic brands more or less in the same way.
Never forget that you don’t do complex solution business in China without your local partners involved. Existing relationships with suppliers/partners must be considered, if you don’t share then you will be left outside. So, always be prepared to give up parts of your solution to get the support of established and well-connected partnerships. Don’t forget, the entire system is built on the principle that to make business in China you are expected to contribute in some way. Either by technology or let partners manufacture/build parts of your solution.
Now, how does this work out in terms of Telematics in China. Well, the important partners are the MNO’s, China Unicom, China Mobile and China Telecom, and as government owned they have split the market by technology and without a close cooperation with them your chance to survive is like a snowball in hell. Secondly, you need call centers for emergency, breakdown and concierge calls. Chinese people love call centers and they love to be served as this is status, convenience and something new to the average people. The lists continue with map providers, this area is controversial as map providers in China must have licenses to use the position algorithms. Of course you need content and that’s localized content, Google doesn’t help you much in this market! Finally you need to deliver all this from a data center and again you need a partner, they are many and you need to find the most trusted. The alternative is to create your own joint venture and source all above to put your local Chinese TSP (Telematics Service Provider) in place.
WirelessCar chose not to and here are the reasons. We truly believe that China should be done in the Chinese way and the simplest way is to use Chinese employees and partners. Over the last 5 years, too many actors have jumped into the segment, very few making money, but clearly a handful brings real value into the eco-system. WirelessCar has chosen to partner with the matured partners on the market and will benefit from this strategy as we work to solve problems and win new business together. There are also examples of attempts to start JV’s to obtain licenses which have not been approved by the Government so that’s proven not to be a reliable way forward. Working in partnerships provides licenses by partners, extends your network and gives you a very flexible resource situation, last but not least you get local friends that understand business rules and culture to get to decisions faster.
However, don’t underestimate your ability and the attractiveness of foreign solutions in China. If you have credible references and success outside China, the market/segment will know that and they will desire your solution based on that. But bottom line is that it comes with a price, you need to share the cake!
Now, taking the Car OEM glasses on, what should they do to capitalize on the situation? As mentioned, there are numerous gold diggers out there and fairly often you see offers which are ridiculously priced. You get what you pay for, trust us! There is a limited number of OEM’s offering connected services in China today, start there and make sure you pick your suppliers based on evidence of success. The Chinese car owner loves connected services: they use I-Call (information/concierge call centers) 30-40 times more than Europe and USA, and they decide on brand and model purchase based on that availability today.
With over 4 million new cars sold the first two months of 2013 and almost every OEM active in selecting or building connectivity, the future is bright in China for those who are prepared.